Abington Hill Toys Case Analysis

CASE 1 - ABINGTON-HILL TOYS, INC.
PART A – INTRODUCTION
In this case, the last of the founders of the company has died with no succession plan for the company. It is the stockholders who recruited and hired Vernon Albright to lead the company in a new direction. Albright hired a comptroller with manufacturing experience, David Hartly, who had various roles in financial field.
The most prominent issue addressed in this case was the company culture prior to the hiring Albright had little regard to the future planning which can lead to financial difficulty. In his new role, David Hartly wanted a complete analysis to ensure the company is in good financial standings now and for the future.
PART B – METHODOLOGY
In this case analysis, the following ratios will be utilized:
1. Debt-Equity Ratio
2. Current Ratio
3. Quick Ratio
4. Inventory Turnover Ratio
5. Asset Turnover Ratio
6. Gross Margin Ratio
7. Z-Score
PART C – SOLUTIONS
The solutions for the ratios listed above, are as follows:
1. $490,000 / $920,000 = 0.53
2. $280,000 / $290,000 = 0.97
3. ($280,000 - $150,000) / $290,000 = 0.45
4. $900,000 / $150,000 = 6
5. $1,200,000 / $1,200,000 = 1
6. $300,000 / $1,200,000 = 0.25
7. 1.2(($280,000 - $290,000)/$1,200,000) + 1.4($60,480/$1,200,000) + 3.3($126,000/$1,200,000) + .6(0) + 1($1,200,000//$1,200,000) = 1.40616
PART D – CONCLUSION
In the Debt-Equity Ratio, the value of 0.53 means over half of the equity in the company is going to the debt that company has accumulated. Overall in this example, this is a risky investment. An investor would not be as eager to hand off more than half of their investment into this company’s debt.
Current Ratios ideally should be at a minimum 1.7. This company having a current ratio of 0.97 is significantly less than the ideal displays that they have issues paying their bills on time.
Moreover, the Quick